1. Judgment under uncertainty: Heuristics and biases Amos Tversky and Daniel Kahneman Many decisions are based on beliefs concerning the likelihood of uncer- tain events such as the outcome of an election, the guilt of a defendant, or the future value of the dollar. These beliefs are usually expressed in statements such as “I think that...,” “chances are...,” “it is unlikely that...” and so forth. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. What determines such beliefs? How do people assess the probability of an uncertain event or the value of an uncertain quantity? This article shows that people rely on a limited number of heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations. In general, these heuristics are quite useful, but sometimes they lead to severe and systematic errors. The subjective assessment of probability resembles the subjective assess- ment of physical quantities such as distance or size. These judgments are all based on data of limited validity, which are processed according to heuristic rules. For example, the apparent distance of an object is deter- mined in part by its clarity. The more sharply the object is seen, the closer it appears to be. This rule has some validity, because in any given scene the more distant objects are seen less sharply than nearer objects. However, the reliance on this rule leads to systematic errors in the estimation of distance. Specifically, distances are often overestimated when visibility is poor because the contours of objects are blurred. On the other hand, distances are often underestimated when visibility is good because the objects are seen sharply. Thus, the reliance on clarity as an indication of distance leads to common biases. Such biases are also found in the intuitive judgment of probability. This article describes three heuristics This chapter originally appeared in Science, 1974, 185, 1124-1131. Copyright © 1974 by the American Association for the Advancement of Science. Reprinted by permi4 INTRODUCTION that are employed to assess probabilities and to predict values. Biases to which these heuristics lead are enumerated, and the applied and theoreti- cal implications of these observations are discussed. Representativeness Many of the probabilistic questions with which people are concerned belong to one of the following types: What is the probability that object A belongs to class B? What is the probability that event A originates from process B? What is the probability that process B will generate event A? In answering such questions, people typically rely on the representativeness heuristic, in which probabilities are evaluated by the degree to which A is representative of B, that is, by the degree to which A resembles B. For example, when A is highly representative of B, the probability that A originates from B is judged to be high. On the other hand, if A is not similar to B, the probability that A originates from B is judged to be low. For an illustration of judgment by representativeness, consider an individual who has been described by a former neighbor as follows: “Steve is very shy and withdrawn, invariably helpful, but with little interest in people, or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” How do people assess the probability that Steve is engaged in a particular occupation from a list of possibilities (for example, farmer, salesman, airline pilot, librarian, or physician)? How do people order these occupations from most to least likely? In the representativeness heuristic, the probability that Steve is a librarian, for example, is assessed by the degree to which he is representa- tive of, or similar to, the stereotype of a librarian. Indeed, research with problems of this type has shown that people order the occupations by probability and by similarity in exactly the same way (Kahneman & Tversky, 1973, 4). This approach to the judgment of probability leads to serious errors, because similarity, or representativeness, is not influenced by several factors that should affect judgments of probability. Insensitivity to prior probability of outcomes ‘One of the factors that have no effect on representativeness but should have a major effect on probability is the prior probability, or base-rate frequency, of the outcomes. In the case of Steve, for example, the fact that there are many more farmers than librarians in the population should enter into any reasonable estimate of the probability that Steve is a librarian rather than a farmer. Considerations of base-rate frequency, however, do not affect the similarity of Steve to the stereotypes of librarians and farmers. If people evaluate probability by representative- ness, therefore, prior probabilities will be neglected. This hypothesis was tested in an experiment where prior probabilities were manipulatedJudgment under uncertainty 5 (Kahneman & Tversky, 1973, 4). Subjects were shown brief personality descriptions of several individuals, allegedly sampled at random from a group of 100 professionals - engineers and lawyers. The subjects were asked to assess, for each description, the probability that it belonged to an engineer rather than to a lawyer. In one experimental condition, subjects were told that the group from which the descriptions had been drawn, consisted of 70 engineers and 30 lawyers. In another condition, subjects were told that the group consisted of 30 engineers and 70 lawyers. The ‘odds that any particular description belongs to an engineer rather than to a lawyer should be higher in the first condition, where there is a majority of engineers, than in the second condition, where there is a majority of lawyers. Specifically, it can be shown by applying Bayes’ rule that the ratio of these odds should be (.7/.3)', or 5.44, for each description. In a sharp violation of Bayes’ rule, the subjects in the two conditions produced essentially the same probability judgments. Apparently, subjects evaluated. the likelihood that a particular description belonged to an engineer rather than to a lawyer by the degree to which this description was representa- tive of the two stereotypes, with little or no regard for the prior probabili- ties of the categories. The subjects used prior probabilities correctly when they had no other information. In the absence of a personality sketch, they judged the probability that an unknown individual is an engineer to be .7 and 3, respectively, in the two base-rate conditions. However, prior probabilities were effectively ignored when a description was introduced, even when, this description was totally uninformative. The responses to the following description illustrate this phenomenon: Dick is a 30 year old man. He is married with no children. A man of high ability and high motivation, he promises to be quite successful in his field. He is well liked by his colleagues. This description was intended to convey no information relevant to the question of whether Dick is an engineer or a lawyer. Consequently, the probability that Dick is an engineer should equal the proportion of engineers in the group, as if no description had been given. The subjects, however, judged the probability of Dick being an engineer to be*.5 regardless of whether the stated proportion of engineers in the group was 7 or .3. Evidently, people respond differently when given no evidence and when given worthless evidence. When no specific evidence is given, prior probabilities are properly utilized; when worthless evidence is given, prior probabilities are ignored (Kahneman & Tversky, 1973, 4). Insensitivity to sample size To evaluate the probability of obtaining a particular result in a sample drawn from a specified population, people typically apply the representa-